Profit Margin Calculator
Three calculators in one — margin from price, price from target margin, and break-even units.
1. Margin from cost & price
Already know the cost and price you charge — see how much margin you're making.
2. Price from cost & target margin
Set a target margin and back-solve the price you need to charge.
3. Break-even calculator
How many units do you need to sell to cover your fixed costs?
Margin vs markup — what's the difference?
Markup and margin both describe the gap between cost and price, but they're calculated against different bases:
- Markup = profit ÷ cost. Buy for £40, sell for £100 → markup is 60 ÷ 40 = 150%.
- Gross margin = profit ÷ revenue. Same numbers: 60 ÷ 100 = 60%.
If you sell your time rather than goods, a project's margin is easier to read as an effective hourly rate: see the project profitability calculator.
Margin is what most people mean when they ask "what margin are you making?" — confusing the two is the most common pricing mistake we see.
Healthy margin benchmarks
- Service businesses (consulting, design, dev): 50–80% gross margin is achievable
- Retail / e-commerce: typically 30–50%
- SaaS: 70–85%+ gross margin is the norm
- Food & hospitality: 60–70% gross on food, but huge fixed costs eat into net
Break-even thinking
Break-even tells you the minimum units you need to sell each month before you make a penny of profit. Once you know it, every unit above goes (mostly) to your bottom line. Bring it down by lowering fixed costs, raising prices, or cutting variable costs per unit.
Worked examples
Consultant rebranding a £40 cost into a £100 sale
Inputs: cost £40, price £100.
Result: profit £60, 60% gross margin, 150% markup.
Why people get this wrong: "I'm making 150% profit" sounds aggressive, "60% margin" sounds reasonable — but they're the same thing. Always state which you mean to the buyer.
Setting price from a 65% target margin on a £75 cost
Inputs: cost £75, target margin 65%.
Result: required price £214.29, profit per unit £139.29.
Formula: price = cost ÷ (1 − margin). If the market won't pay £214, your options are: lower the cost, accept a lower margin, or position the offer differently.
Break-even for a £2,000/month freelance business
Inputs: fixed costs £2,000/month, variable cost per unit £30, selling price £80, target profit £1,500.
Result: break-even = 40 units/month. To hit £1,500 profit you need 70 units/month (£5,600 revenue).
Contribution per unit is £50 (price minus variable). Fixed cost / contribution = 40 units to break even. Add target profit to fixed cost first if you want a profit-inclusive target.
Frequently asked questions
What's a healthy margin for a freelance service business?
50–80% gross margin is achievable for consulting, design, dev, and most knowledge work. Below 40% usually means you're underpricing or carrying too much delivery cost. Above 80% in your first year usually means you've forgotten to count something — admin time, taxes, equipment depreciation.
Why does margin matter more than revenue?
£100k revenue at 40% margin keeps £40k; £80k revenue at 70% margin keeps £56k. Margin compounds: at scale, a 10-point margin improvement is worth more than 30% extra revenue. Always optimise margin first.
Should I quote markup or margin to clients?
Neither, ideally. Quote a price. If pressed on "what's your margin?", be careful — clients often hear that as an invitation to negotiate it down. The answer is "industry standard for this work" or "what's needed to deliver to the quality you're paying for".
What's contribution margin?
Price minus variable cost per unit. It's what each sale "contributes" toward fixed costs and profit. Break-even = fixed costs ÷ contribution margin. Useful for any business with a mix of fixed overheads and per-unit costs.
How do I lower my break-even?
Three levers: raise prices, cut fixed costs (move to cheaper software, drop subscriptions, work from home), or cut variable cost per unit (better suppliers, smarter delivery process). Pull whichever has least pain.
Does this calculator account for VAT?
No — work all the numbers ex-VAT. If you're VAT-registered, the VAT you charge isn't yours; you pass it to HMRC. Margins are calculated on the actual money you keep.
Pricing maths only — for take-home after tax, see our self-employed tax calculator.